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Reality Returns

All of the usual suspects are freaking out over Trump’s decision to impose tariffs on steel and aluminum. Most of it is by hysterics masquerading as analysts. Some of it is simply the innumerate throwing yet another tantrum about the bad man who vexes them. Some of the hysteria is due to the fact that people in the chattering classes were sure they had talked this bit of reality into going away for good. Reality, however, is that thing that does not go away when you stop believing in it. The reality of trade is now back.

The amusing thing about trade debates among the chattering classes is that they never bother to mention the trade-offs that come with trade policy. Trade is, after all, like any other public policy. There is no policy option that does not come with a set of pluses and minuses. Our rulers, however, were sure they had sacralized their preferred set of trade-offs a long time ago. It turns out that the only people on whom this worked are the innumerate numskulls in the press. The rest of us remain skeptical about “free trade.”

In theory, which means not in reality, trade between countries is a net benefit to both countries. Open trade with Canada means they can sell more beaver hats and hockey sticks to Americans, thus making the typical Canadian richer. Similarly, it means Americans can sell more apple pies and boomsticks to Canadians, thus making the typical American richer. In reality, there will be Canadians who suffer from free trade with America and Americans who also suffer in the exchange. That’s how the world works.

While the hockey playing folks of northern Virginia will benefit from cheap hockey sticks from Canada, the suddenly unemployed hockey stick makers in Minnesota are the ones paying the price for it. Similarly, the apple growers of Canada get stuck with the bill for the suddenly cheap apply products in Toronto. The hidden cost of free trade is a lot of people you don’t know losing their jobs or seeing their wages cut. When you’re the guy getting the pink slip, the cost is not hidden and that has a social cost, as well.

Now, trade can be beneficial to both countries in that it promotes efficiency. The lazy and unscrupulous hockey stick makers in Maine, suddenly have to compete with the crafty canucks. This means better hockey sticks, but also less waste. Protectionism, like all public polices, comes with a cost too. That cost is more often than not carried by the consumer. Worse yet, it often promotes the sorts of corruption of public officials that erodes public trust in institutions. Again, there is no free lunch. Life is about trade-offs.

That is why the ruling class is in a panic over the Trump trade policies. It’s not about the cost of steel and aluminum. It is not about the possibility of retaliation. The real fear is that decades of hard work to de-legitimize open debate about trade policy is being undone. It means all of these trade-offs that come with trade between nations will have to be discussed. The billionaire class that has benefited from the current set of polices, is in no mood to defend their fiefs from the rabble. So, in waddles the clown army.

The fact is, the current trade regime ushered in after the Cold War, has proven to be the boondoggle critics like Pat Buchanan warned about 30 years ago. Open trade with Canada, an English-speaking first world country, is mostly beneficial. Trade with Mexico, a third world narco-state that now operates as a pirate’s cove for Chinese and American business, has been a disaster. NAFTA has made Mexico a massive loophole in American labor, tax, environmental and trade policy. A loophole ruthlessly exploited by China.

The current trade regime is also at the heart of the cosmopolitan globalism that seeks to reduce nations to a fiction and people to economic inputs. This neoliberal orthodoxy has eroded social capital to the point where the white middle class is nearing collapse. It’s not just America. The collapsing fertility rates in the Occident are part of the overall cultural collapse going in the West. Slapping tariffs on Chinese steel are not going to arrest this trend, but it does open the door for cultural critiques of the prevailing orthodoxy.

That’s the reality our betters would just as soon not allow back into the conversation. The fact is, a nation is its people. What defines France is the shared character and shared heritage of the people we call French. What defines a people is not the cost of goods or the price of labor. What defines a people is what they love together and what they hate together. It is the collection of tastes and inclinations, no different than family traditions, that have been cultivated and passed down from one generation to the next.

Even putting the cultural arguments aside, global capitalism erodes the civic institutions that hold society together. Instead of companies respecting the laws of host nations and working to support the welfare of the people of that nation, business is encouraged to cruise the world looking for convenient ports. There’s a word for this form of capitalism. It’s called piracy. Global firms flit from port to port, with no interest other than the short term gain to be made at that stop. Globalism is rule by pirates.

That’s the reason for the panic by the public relations firms hired by our globalist, billionaire masters. To question “free trade” is question the arrangement that keeps the current regime in place. It may seem like a small thing, tariffs on steel, but it is the sort of thing that can unravel the entire project, because it legitimizes the sorts of questions that can never be answered honestly by globalist. To his credit, Trump seems to get this, which is why he has pressed ahead with this. He’s flipping over an important table in this fight.

Apple receives millions of used iphones on trade-ins every year in Europe, USA, etc. Consumers in India generally cannot afford new iphones. Apple planned to resolve these two issues by selling used iphones in India for $100 each. India was appalled at the threat to its local industry. Its response was not a tariff – it simply banned Apple from selling used iphones in India. Trump is doing a terrible job selling his trade-retaliation – there are many disgraceful practices like the one above, especially in India and China, that he should highlight. The U.S. has the most open markets… Read more »

Hmmmmmmmm. The problem I have with Globalist/Eeeeevil Joooo conspiracy theories is that the supposed conspirators and their leaders often aren’t smart enough to find their ass with both hands! We have to remember the cloud-dwelling globalist oligarchs are at each other’s throats the way Canadian hockey stick manufacturers are with their counterparts in Maine. They are not yukking it up in the bar after work together – although their pawns and peons might. They may work together occasionally, but you can bet they have a plan to kill their adversaries when the time is right. The production glut is now… Read more »

Its not a conspiracy. Just a commonly held set of strategies, beliefs and objectives. When you get enough people who believe and act in a similar way, what you get looks and functions like a conspiracy. This is actually how a hive works..every ant does its own thing. There is no central command. But the actions of every ant are controlled by instincts, and since every ant shares the same instincts and behaves the same way, you get emergent behaviors. Every ant functions like a single neuron, and the interactions of every ant turn the hive into a kind of… Read more »

Yes! Too many people (even some quite smart ones) just don’t understand emergent order/phenomena. Therefore everything ends up looking like a conspiracy of “those who rule us all.”

Of course that doesn’t mean there aren’t some conspiracies carried out by evil actors. In fact I’d say that many of these situations start out as emergent phenomena and then are exploited by the evil actors.

Steel policy in the first GWB administration is one of the few things I look back on and think was done right. He put a tariff on imported steel and the WTO eventually forced us out of it, but it lasted long enough to allow the remaining US steel companies to regroup and retool with electrical and gas equipment to remain viable in the race of the dumping that was and is still going on. He took a ton of flak mostly from the “right” over that. The Chinese know that no country without its own steel industry, or lacking… Read more »

Another point is that free trade as it is usually discussed is highly theoretically utilitarian and justified retrospectively with respect to any controls. Compare the corn laws of England to the grain policies of France in the eighteenth century. English policy seems to have been directed towards giving incentives to domestic production and rewarding it with bonuses for surpluses allowing exportation and mild, but effective tarrifs. It was strategic. French policy focused almost exclusively on prices and was reactive to both external and internal pressures, and resulted in periodic shortages and bread riots off and on, despite having much more… Read more »

I have an advanced degree in economics and know all the technical arguments for free trade. But I believe you have laid out the full perspective very well. One additional factor in favor of free trade is the exchange of advances in technology and medicine. However, since the US is dominant in this area, this benefit is enjoyed much more by other countries than us, and as you point out, is exploited by the pirates in China. There is also the real possibility that other countries will back down and lower their tariffs without significant retaliation.

The thing that never gets discussed is the impact on social capital. Cheap appliances in suburbia are half the transaction. The other half is the collapse of small towns and communities when the manufacturing base goes overseas. it’s not just the hard costs of welfare, unemployment and lost utility. It’s the cost of alienating the population from itself. Social democracy assumes a high degree of social trust. Remove it and the whole things starts to wobble.

Back in the early 90’s, working as a salesman, I sold a product to Fruit of the Loom. They had several manufacturing plants located in the Mid-South. I took a tour of one of the plants in one of the small towns. I think it was Campbellsville, Kentucky. It was a clean facility with a lot of folks, mostly black women, with sewing machines making underwear. It looked like a pleasant working environment. A couple of years later, the CEO of Fruit of the Loom announced that they were moving all of those plants down to Central America because their… Read more »

This is why I have migrated from free trade libertarianism to the perspective Zman has laid out so well. We have wiped out good jobs for the hardworking lower class to benefit the elite. The extra fraction of GDP is not worth the loss of social cohesion. I worked for a shoe company in the 1990s as we closed dozens of Midwestern factories. Watching the nicest, most hardworking people in the country lose their jobs was heartbreaking. The opioid crisis is another side effect.

The funny thing is a Right Wing populist dictatorship could actually create a decent recovery In the 1930’s 93% of the US economy was internal only and a government able and willing to basically gut trade and force work sharing could create a functional economy It won’t be as prosperous as the post war period because of efficiency though, automation means we need less labor which means lower wages and less workers and do to global supply chain, we can’t export surplus production An example highly non technical it might have taken 10 men to make 1000 units of steel… Read more »

That’s very interesting, connecting the opioid crisis to the lack of gainful employment for those best suited to various labor jobs. Self-respect and pride in a job well done are being stolen from millions of our upper lower classes by global pirates. It’s disgraceful.
Another thing: If acting in concert Americans quit buying “Chinese,” we’ll be accelerating the effect of tariffs, wouldn’t we? I’m asking the more economically erudite among us if I’m right on this one.

I blame the people putting shit into their bodies – not the “global pirates” who sell them the shit. This is (again) another case of “who drives the market – producer – or consumer?” – if you can’t get that right – then you can’t make any sensible economic calculations. Want to piss people off? Then tell them they could easily make their lives better by doing one simple thing: stop moving their goddam arms. Stop moving their arms shoving food into their already overweight bodies. Stop moving their arms bringing another bottle of beer attached to the mouth on… Read more »

People have understandably advocated for this from the beginning; decades ago. “Buy American”

But the problem is game theory. First movers suffer (thru loss of buying power) and just can’t/won’t sustain it. And too many just won’t, as they’ll make the choice that maximizes their own buying power. Cheap stuff is just too enticing.

And so we need top down measures to put everyone on the same footing, and then reap the longer term and more society-wide advantages.

The other side of that equation is: Are people willing to pay more for underwear made by black women in Kentucky? I doubt it. When people go to underwear store they’re typical buying behavior is: ” The Hanes are cheaper than the Fruit of the Loom – I don’t give a shit if a bunch of fat black women in Kentucky lose their jobs” One of the only places I’ve seen a concerted effort to retain local industry – is coming out of what are typically lefties. Around here – it’s not uncommon to see “No Farms No Food” bumper… Read more »

“The other side of that equation is: Are people willing to pay more for underwear made by black women in Kentucky?”

They will if the answer is less welfare, less social dysfunction and better communities. The people in charge, our so-called elites, are supposed to make these arguments. They are supposed to explain the trade-offs.

The trouble is our elites lied to us and now we are facing a huge bill that may never be repaid.

Yes, less welfare, less social disfunction, and better communities. And it’s not just the towns that the Fruit of the Loom plants are located in. We sold them the little paperboard inserts that kept the package of underwear rigid. Many millions of those pieces. Think of all the other suppliers and materials from other companies in other communities and the families that were involved in producing a product like underwear. It’s a domino effect.

I would add that QUALITY is a “sell-able” difference. Notice that the pockets in your jeans are smaller than they were 10 years ago? That the light jacket you wear only has 3 pockets in front, not four?

That the el-cheapo underwear chafes because it’s smaller by a few centimeters?

Yes – to *some* people. But when you don’t know or don’t perceive what the quality differences are – you buy on price. The real way to get high prices – is to sell on status. Women will pay $1000 for a pair of Louboutins – when most other manufacturers can’t sell a pair of women’s shoes for more than about $100. Mercedes used to sell for a high premium over here – even though almost the exact same car could be bought in Germany cheap enough to be used as a taxi. Look at what Apple does with their… Read more »

You must be dealing with different people than I deal with. People are economically ignorant – otherwise they wouldn’t think that they could continuously add to the national debt without any bad affects. I have had the tax debate with more people than I care to remember over the last 3 decades – and made the same exact point you just made above: namely that we should cut taxes and get people off welfare and the almost universal response goes something like ” OMG! – cut taxes – we won’t have any roads! People will die in the streets! How… Read more »

The 3D printing thing is still a ways off in regards to building parts of the same quality as we get now out of the traditional methods IMHO. It’s good for prototyping and making small plastic parts – but large runs of metal parts are still better made using currently existing methods. Manufacturing however has changed enough that it is possible to get “specialty” cars built with almost the same level of quality that you can get from any of the large auto companies. Some classic American muscle cars – like Mustangs and Camaros – can now be built from… Read more »

Ultra local manufacturing is the end of modernity as the only need we have for scale is making the manufacturing machines themselves If a community makes all it needs locally or nearly all of it, what use is D.C as its configured None really which is why D.C. will use violence if they can to keep control Reminds me of V is for vendetta If I am sure of anything, Mr Finch, it is that this government will not survive if it is to be subject to your feelings. Mr Dascombe, what we need right now is a clear message… Read more »

It’s more complicated than that. The manufacturing base is coming back – just not as big smokestack industries. Because of the spread of relatively inexpensive CNC equipment that runs on open source G-code – there are small machine shops popping up all over the place. These people are reliant on machine tools largely manufactured in China or Taiwan – since there is almost no lower end machine tools available any more that are built in the US. If you go up past say $40k – then you will start finding machining centers built by Haas – and others , right… Read more »

More like oscillate like a brigde with broken wires The weak social democracy in the US is in part do to our lack of common culture, Black/White race issues of course played a hefty factor but so did mass European immigration A US that was basically entirely Anglo and Protestant would be much higher trust even than the 1950’s were not that we had that for more than a couple of decades This kind of ties into the gun control push as well The cloud people desperately want to disarm the dirt people before the dirt people make them pay… Read more »

I wonder if the consolidation of economic power is tied to the free trade ideology. We’ve had a massive centralization of financial and economic power in this country. Apparently no one believes in antitrust any more, and global trade is what these firms want. Interestingly enough, Robert bork played a role, and not a good one, in this.http://www.theamericanconservative.com/articles/robert-borks-america/

Note that NONE of the tariff critics ever mention such things as FLSA, EPA, EEOC, and US taxes (to name only a few burdens torturing businesses here.) NONE of them propose to eliminate–not just ‘reduce’–any of these costs.

Yes or the social benefits freeloading by these companies that pay their employees minimum wage and who supplement it with SNAP, Food Stamps, and Medicaid – all of which are paid for by the US tax payer. Cost shifting at its finest.

“The fact is, a nation is its people.” This is something our (((betters))) know and they get, first, the left, and then the right to deny. “A people” becomes “diversity”, which is more important than the nation. “Conservative values” is just another phrase to deny reality and celebrate intangible descriptions that have nothing to do with reality. The (((elite))) know that words have specific meanings. That’s why they spend billions to deconstruct those meanings and apply other words that, through their repeated use, become synonyms with reality based words. As Orwell prophesied, words are disappearing. The (((elite))) make words disappear,… Read more »

This is another example of judging Trump by what he does, not what he says. He actually did this, on the gun issue he just said stuff. For me I’m still not sure if Trump is a genius or idiot, but when judged by what he does I still say he’s the best POTUS of my life. I’m 60.

The non-tariff trade barriers have affected me a lot more during my business years. I saw them strangle a lot of innovative young companies, on the front end because they couldn’t sell into Europe and E. Asia, and on the back end after the Asians had mastered the tech and took away their domestic sales.

Very hard to counter since “safety,” “environment,” or “RF interference” are usually the justifications.

I should add that the non-tariff barriers destroyed the sorts of high-tech jobs in high-growth industries that the free traders claimed would take the place of the old manufacturing jobs. I suspect that the non-tariff barriers are responsible for a fairly large fraction of wage stagnation of the past 45 years. I would guess third after flooding the job market with female labor, and illegal immigration.

“There’s a word for this form of capitalism. It’s called piracy. Global firms flit from port to port, with no interest other than the short term gain to be made at that stop. Globalism is rule by pirates.”

After reading that all I could think of was Monty Python’s Crimson Permanent Assurance. 🙂

In Theory, free trade allows nations that ‘specialize’ to produce goods for other nations that specialize in something else. In reality, however, first world nations are universally ‘generalist’, it’s virtually a defining characteristic that they are self-sufficient.
Free trade attempts to destroy self-sufficiency.

Ok, I never took an economics course in my entire life so I’m a dope, but wasn’t it always possible to buy foreign specialty products? Which would mostly consist of luxury items like French wine, I suppose. I think G.K. Chesterton had a theory (distributism?) that the ideal is self-sufficiency of the community right down to the village level, which is sounding pretty good these days. Just don’t know how you would get there from here .. without an economic collapse, at least.

“….The billionaire class that has benefited from the current set of polices, is in no mood to defend their fiefs from the rabble.” Case in point, headline from today’s Omaha World Herald: “TARIFFS WOULD AID STEELWORKERS AT EXPENSE OF MANY OTHER. Larger industries from autos to aerospace and their 6.5 million workers could be hurt by move”. The Omaha World Herald (among other newspapers) is owned by BH Media…….BH as in Berkshire Hathaway……..meaning Warren Buffett. Meaning readers can anticipate much more of this in the coming months. By the way, great article today Z-Man. So if you haven’t kissed and… Read more »

In my real life, I have been ranting that everything you see around you is fake and manufactured. This tariff thing is one of them. Over at Conservative Treehouse they do a great, but interminably long and detailed, explanation of how “free trade” has been usurped by a gaggle of huge multinational enterprises, to squeeze the profitable segments of commerce from the ultimate end-users and the ultimate suppliers of products back to themselves, as the oligarchy of middlemen that own the system. The Trump tariff move is an opening shot to break down that oligarchy. The other “fake news” of… Read more »

Your weight of the Canadian ‘apple grower’ is a distortion of real trade dynamics. Free trade could work if those are the only factors, i.e. the American hockey stick maker would switch to apple pie making, Canadian apple pie maker switches to hockey sticks. There shouldn’t be a loss of jobs on either side. The problem is governments subsidize the given industry making their costs lower than the free market would set. They cheat. It’s not free anymore, that’s how we get an imbalance. That’s what Trump is fighting. The hysteria will settle down and return to reality in time.

Why sure!! After all, the capital equipment for making hockey sticks and apple pies is identical, right? Just as are the regulatory hoops, right? And hell–ANYONE can run FDA-compliant QC after having QC’d hockey sticks for 20 years.

The Fundamental Theorem of Free Trade is that “producing and distributing a product at the lowest cost” is good for humanity in general; it is Taylorism writ large. There is no room for local, regional or national loyalties and affections if the sole purpose of being alive is to produce and consume at maximal efficiency. Free trade within, say, a town, is good; it means farmer Brown can’t charge a dollar more for a bushel of carrots than farmer Jones. But global free trade means that neither Brown nor Jones can raise carrots at all at a profit, because ADM… Read more »

So absolutely correct. Both capitalism and socialism work pretty well from the bottom up. But not from the top down, as there is too much room for massive graft and a big “skim” to be taken in the top-down versions.

The Federal government, by definition, is a “top-down” exercise. Hence the Constitutional structure and push for some level of autonomy at the state and local levels.

There was a time in the 90s, after the USSR stopped existing and books like Fukuyama’s ‘The End of History’ were read without laughter, when the ‘new world order’ stuff made sense to those of us “decompressed” by the end of the Cold War.

To admit that “free trade” agreements were music to our post Cold-War ears is like admitting to a porn addiction, and couldn’t possibly sound like anything but madness to young ears today. We were Americans; they are Oceanians. They just don’t know the distinction.

I made the free trade arguments while I was in grad school for econ. They’re pretty straightforward and, I now think, basically mistaken. Everyone who lost a job as some lower-level of manufacturing value was supposed to get an even better job at higher value manufacturing. Or maybe learn how to be a graphic designer.

It didn’t happen because it turns out most people simply can’t re-train themselves to do something different after having learned one type of skill. Somebody who has spent 20 years making carpet is supposed to learn to make airplane engine parts, or something?

The good news is that all the local electricians, carpenters, painters, plumbers, floor refinishers, equipment dealers, roofers, masons, real estate agents — the whole kingdom of entrepreneurs who ground themselves in the community and earn local trust — are making great money these days; the transient globalist employees finding themselves in our town (a pleasant suburban village much sought after by white professionals) to satisfy their corporate masters, to raise their kids in a safe school, to pay off their absurdly expensive vehicles, and intent to sell their homes a few years from now at a profit, trust the recommendations… Read more »

Well, I am an engineer, but a long time ago (…in a galaxy far, far away…) I did roofing. It was, running away, the hardest work I have ever done. And it did NOT pay all that well – at least compared to engineering. I am here to tell you that, if I have some other income and will not starve, You’re damn right I would rather not be a roofer. It’s not a matter of being programmed or “self-guilding”, it’s that at my age I wouldn’t last a day up on a hot roof – I would die of… Read more »

LOL – “free” trade. Whenever a “State apparatchik” “intervenes” in “trade”, what the HELLo is “free” about it?! Since the beginning of “mercantilism” with the ” Brutishs’ ” defeat of the Spanish Armada, COL (City of London) int’l corporatism has/is/will continue to dominate. The “United SNAKES Corp” is nothing more than the military enforcer of said. But, the Russians and Chicoms have had enough, and economically, financially and militarily, they be [justly] readying to “make amends”. Hoo-wah.

Using Canada for free trade is perhaps both a good and bad example as our legal systems are (or were) very similar. Way back when, you could cross over the border, e.g. Port Huron, MI to Sarnia, ON and the differences were hard to see, or subtle. Canada has similar environmental and work safety and other regulations as America. China does not. China doesn’t care if their workers get hurt. It lets the businesses dump toxic junk into the air and water. The government prints capital and gives land to factories. Similar with Mexico. You mean you actually want to… Read more »

Another thing you pointed out with more words is that we are both producers (of our labor) and consumers.

When almost anyone talks about “free trade”, they say consumer goods would cost more. But they say nothing about the price of your product – your wage.

Free trade means working for a minimum wage with $5 T-Shirts, where as it used to be working a good wage with benefits where one earner could raise a family, but T-Shirts were $10. Cutting my wages by 3/4, but cutting my expenses by 1/2 is a losing propositon.

“Trade with Mexico, a third world narco-state that now operates as a pirate’s cove for Chinese and American business, has been a disaster.”

Quite. The part I never hear mentioned is the fact that moving labor elsewhere, especially to third-world basket cases such as Mexico, was made profitable because the Democrat party and the federal government made Americans artificially expensive through ridiculous taxation, minimum wage laws, unionization, environmental ham-fistedness, etc; free trade just made moving labor elsewhere possible.

President Reagan put a tariff on Japanese motorcycles because Honda was dumping their bikes into the US at below cost.

They were making so much money on their cars they could afford to do this. The tariff gave Harley-Davidson ( the last american motorcycle company ) breathing room to retool and compete in the modern day market.

Forgive my simplistic blue collar observation to global economics, but when a foreign government operates in a manor to undermine a domestic manufacturer we owe it to our fellow citizens to protect their jobs.

The endgame of globalism is a social caste system in which a small cadre of elites rule over a slightly larger technocratic, managerial, and governmental class, another slightly larger group of professionals and specialists, and then everyone else is relegated to being drone worker bees (obedient, dependent, hive-minded). They need to take us there incrementally and by subterfuge, lest we notice and revolt. They are counting on the stupidity epidemic to enable this.

Do I discern a pattern here? Some jobs can’t just be transferred overseas. For the loggers, we need to use environmental restrictions like the spotted owl to put them on the unemployed roles. For the Roughnecks, drilling bans. Coal miners, environment again. Is somebody out to impoverish us?

I had nothing to contribute to the discussion until I thought about US Oil production/Fracking etc. All the regulations and “Gubmint Wisdoms” from our Global betters…. I still remember the “power of the Market” the day some self absorbed Trader sent the Future Price of Oil to a new Record. So he could frame his options…. Govt should do as little as possible. But always in the interests of the American people…. Fracking/Oil boom provided lots of jobs. Good pay. Hard hours & conditions. People went for that. Because it made sense to ‘them’. NOne of them asked what GlobalBetters… Read more »